Why this might be the best time to flip properties

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This is Chubby Wallet. The weather man of property newsletters (we let you know what to expect ahead of time)

Here's what we’ve got for you today..

• Bank of England cuts interest rates

• Why this might be the time to flip properties

• UK housing affordability: key trends

• New EPC standards for private rental properties

Let’s dive in

The Bank of England just gave homeowners and investors a small win—a 25-basis-point rate cut, bringing the benchmark rate to 4.5%.

It’s not a game-changer yet, but it signals that we’re heading toward a lower-rate environment. That’s good news for borrowers, but Inflation is still a threat with projections hitting 3.7% later this year (up from 2.8% expected).

Why is this happening? Rising energy prices, higher regulated costs e.g. water bills, bus fares, and uncertainty in the global economy…

Morgan Stanley and Goldman Sachs also think the Bank of England will cut rates much faster and deeper than most expect.

They’re predicting a potential reduction to 3.5% or even 3.25% by mid-2025 which is way below what the market currently anticipates. If they’re right, mortgage rates could drop below 4% by year-end.

That will be great for buyers’ but not so much for savers 😬 

House Prices & Demand: What’s Next?

If rates do fall as aggressively as predicted, this could fuel demand, but this will depend on the state of the UK economy. Currently it is set to grow by 0.75% in 2025 (half of what was previously forecast)

Weak wage growth and a soft labour market could also keep a lid on house price growth. Back in October 2024, the economy shrank by 0.1%, this was followed by a rise in unemployment in November triggering fears of a recession..

Our view is that the key factor to watch is the job market… we think a scenario in which unemployment falls more than expected is also the scenario in which house prices are most likely to rise…

How does the Bank of England view the property market?

The report also added that demand has softened in the rental market and tenants are less willing to accept further increases in rental price.

Landlords are more willing to accept lower profits on rental properties to retain desirable tenants ahead of the ban on no-fault evictions.

Final thought…

If the job market were to weaken further and unemployment were to rise, it could exert faster downward pressure on mortgage rates.

So where does this leave us? If you’re a first-time buyer, waiting for further rate cuts could be smart, but don’t pass on a good deal if one comes your way.

Investors should be sizing up opportunities before competition heats up again. And homeowners rolling off fixed-rate mortgages should keep a close watch on where rates go next—remortgaging at the right time could mean serious savings.

A third (33%) of first-time buyers (FTBs) now believe it’s a good time to buy property—almost double the figure from December 2023, according to the Building Societies Association (BSA).

This uptick in confidence signals a crucial trend: demand is growing.

More than half (54%) of aspiring homeowners expect house prices to rise in the next year, reinforcing the idea that the market is on an upward trajectory.

Why Investors Should Care

• First-Time Buyers Are Back: The biggest challenge for flippers is selling the finished product. With FTBs returning, selling well-renovated properties just got easier. Their optimism is key to a stronger resale market.

• Bank Rate Cuts = More Buying Power: After three interest rate cuts in the last 4 months (with more expected), affordability is improving. Lower mortgage rates mean buyers can borrow more—good news if you’re selling a flipped property.

• Stamp Duty fears fading While 22% of FTBs still see Stamp Duty as a hurdle, the bigger issue—high mortgage costs—is easing. That’s a shift in the right direction for transactions.

What the Numbers Say

According to Chris Watkin from Property Stats, the latest UK property market data reinforces the case for flipping properties in 2025:

• Listings Increase: 35.9k new listings hit the market last month —13% higher than the same time in 2024 and 12% above the 2017-2019 average. This means more properties to choose from and potential renovation opportunities.

• Sales Bloom: 27.5k UK homes were sold STC (subject to contract) last month, a 29% increase compared to this time last year and a whopping 37% higher than pre-pandemic levels.

• Falling Sale Fall-Throughs: Only 22.5% of sales fell through last month, well below the historical average of 24.2%, and a huge improvement from the 40%+ fallout seen after the Truss Budget crisis.

• House Prices Climbing: The price per square foot has risen to £342 in January 2025, up 3.64% from January 2024, suggesting profit potential for well-positioned flips.

The Affordability Factor

While mortgage affordability remains a challenge, concerns are easing. Only 6% of buyers are worried about affording payments over the next six months—the lowest rate since June 2022.

Plus, just 1% lack confidence in their ability to keep up repayments. Paul Broadhead, head of mortgage and housing policy at the BSA, highlights the positive shift:

Risks & Considerations

Of course, the road ahead isn’t without challenges. Political and economic uncertainties can still shake confidence, and bank rate cuts may not be as frequent as forecasted.

Investors should stay agile, keeping a close watch on financing costs and buyer demand.

If you’ve been waiting for the right conditions to start flipping properties, this could be your moment. With FTB demand rising, mortgage costs easing, and market activity heating up, 2025 might just be the start of a lucrative new flipping cycle.

Nationwide’s House Price Index shows a 4.1% year-on-year (YoY) increase in UK house prices, down from 4.87% in the previous month, with a 0.1% month-on-month (MoM) rise.

While this suggests relative stability, affordability remains a key concern.

The report emphasizes that while affordability has improved slightly, it remains stretched by historic standards, particularly in high-cost regions.

2The impact of mortgage rates normalizing post-ZIRP (Zero Interest Rate Policy) and wage growth slightly outpacing house prices in some areas has contributed to marginal improvements, but the long-term trend still reflects a challenging environment for first-time buyers (FTBs) in the more expensive areas.

Where do buyers stand?

One of the key metrics Nationwide focuses on is the percentage of take-home pay required for a typical mortgage payment.

• The current figure stands at 36% of take-home pay for a typical first-time buyer.

• The long-run average is 30%, but when adjusting for the past 20 years, it is closer to 33-34%.

• This suggests that affordability, while improving slightly, is still above historical norms.

However, this metric is heavily influenced by mortgage rates, which remain elevated compared to the ultra-low rate environment of the covid years

Regional Affordability: Differences across the UK most affordable regions

Nationwide highlights that affordability varies significantly by region, with the North of England and Scotland offering the most accessible entry points for buyers.

• In Scotland, mortgage payments account for just 20-22% of take-home pay, and house prices are around 3 times earnings, making it one of the most affordable regions.

• In north of England, a similar picture emerges, with mortgage payments around 25% of take-home pay and a house price-to-earnings ratio of approximately 4 times salary.

• Wales and the Midlands: These areas sit somewhere in between, with affordability metrics closer to the national average. In these regions, a typical first-time buyer sits around the 20th percentile of income, meaning 2roughly 80% of earners in these areas can afford to buy a home if they choose to.

However, the rental sector remains strong, suggesting that lifestyle preferences, job flexibility, and mobility may also play a role in housing choices beyond just affordability constraints.

Least Affordable Regions

At the other end of the spectrum, affordability is significantly more stretched in London and the South of England.

• London: The average first-time buyer is now spending 60% of take-home pay on mortgage payments, with a house price-to-earnings ratio of 8 times income.

• South East & South West: Affordability remains tight, with mortgage payments consuming between 40-50% of take-home pay on average.

In these regions, a first-time buyer typically sits within the 90th percentile of income, meaning only the top 10% of earners can comfortably afford to buy.

This highlights the growing disparity between different parts of the country, with London, in particular, requiring far higher incomes to enter the housing market compared to other regions.

Who Can Afford to Buy?

The report also sheds light on how affordability varies across different occupational groups.

• Higher earners (professionals and managers) spend a lower proportion of their income on mortgage payments, typically around 25% or less.

• Lower earners (elementary occupations, close to minimum wage jobs) are spending over 50% of take-home pay on mortgage payments, making homeownership significantly more challenging.

While this is expected, given wage disparities, it does reinforce the extent to which affordability remains a structural issue in the UK housing market.

The Data Behind Renters vs. Buyers

Nationwide also touches on the relationship between high rents and the difficulty of saving for a deposit. Their chief economist argues that high rental costs are preventing renters from saving, which remains a barrier to homeownership.

However, the data presents a more nuanced picture: The average rental household earns around £34,000 per year. The average first-time buyer household earns approximately £60,000 per year.

This suggests that those transitioning from renting to buying typically experience an income uplift, indicating that affordability constraints are not just about high rents but also about income progression.

Additionally, homeownership rates have shown some improvements among younger age groups in recent years, contradicting the often-repeated narrative that homeownership is becoming impossible for younger generations

The report underscores that affordability is not just a function of house prices but a complex interplay of wages, interest rates, and regional economic factors.

For investors and market watchers, understanding these dynamics is crucial for identifying opportunities in both the buying and rental markets

The government has announced significant changes to energy performance requirements in the private rental sector.

This will require all private rental properties to achieve a minimum Energy Performance Certificate (EPC) rating of C by 2030, marking a substantial increase from the current minimum requirement of EPC E.

Financial Framework and Support Mechanisms

The government has proposed a comprehensive financial framework to support this transition:

• Maximum expenditure cap of £15,000 (including VAT) per property

• Potential affordability exemption reducing the cap to £10,000 for properties with lower rents or in lower council tax bands

• Cost caps will commence from 2026, with prior expenditure excluded from calculations

• Current cost cap for achieving EPC E remains at £3,500 

Warm Homes: Local Grant Programme

The newly announced grant program offers substantial support:

• 100% funding for the first eligible property

• 50% funding contribution for additional properties

• Overall subsidy cap of £315,000 per landlord

• Dual structure providing up to £15,000 for energy performance upgrades and an additional £15,000 for low carbon heating systems Implementation

Timeline

The government's preferred approach establishes a two-phase implementation:

• New tenancies must meet EPC C requirements by 2028

• All existing tenancies must comply by 2030

Property Eligibility Criteria

To qualify for the Warm Homes: Local Grant, properties must meet specific criteria:

• Current EPC rating between D and G (Energy Efficiency Rating SAP score of 68 or below)

• Located in England

• Property must be privately rented Household Eligibility Pathways

The programme offers three qualification routes:

• Eligible Postcodes: Properties in specified areas based on Indices of Multiple Deprivation

• Income Proxies: Households receiving qualifying benefits including:

  • Housing Benefit

  • Income-based Jobseeker's Allowance

  • Income-related Employment and Support Allowance

  • Income Support

  • Pension Credit

  • Universal Credit

• Income Threshold: Households with gross annual income below £36,000 or meeting the equivalised 'After Housing Costs' threshold

Strategic Approaches to Compliance

Based on expert advice from Chartered Building Engineers and property consultants, landlords should consider the following priority improvements:

Insulation Improvements

• Loft Insulation

  • Upgrade to 300mm depth for optimal effectiveness

  • Potential EPC score improvement of 8-9 points

  • Average cost benefit ratio makes this a priority investment

• Wall Insulation

  • Solid wall insulation offers significant benefits but requires careful consideration

  • Cavity wall insulation presents a more cost-effective solution for modern properties

  • Important considerations for moisture management and ventilation

• Floor Insulation

  • Particularly effective for properties with suspended floors

  • Can be combined with necessary maintenance work to optimize costs

Heating System Upgrades

• Modern condensing combi boilers significantly improve energy efficiency ratings

• Programmable thermostats with multiple zones offer additional benefits

• Installation of Thermostatic Radiator Valves (TRVs) on at least 75% of radiators

Window Improvements

• While costly, double glazing contributes to overall energy efficiency

• Consider phased replacement prioritizing windows in poorest condition

• Average improvement of 2 EPC points per complete window replacement

Market Impact Assessment

Current government data indicates:

• Only 39% of private rented properties currently achieve EPC C or above

• Average upgrade costs estimated at £7,737 per property (2020 figures)

• Approximately 30% of properties may require investm8ents exceeding £15,000

Consultation and Future Developments

The government has launched a new consultation titled "Improving the energy performance of privately rented homes in England and Wales - 2025 update."

Key areas under consideration include:

• Primary standards for fabric performance metrics

• Secondary standards for smart readiness or heating system metrics

• Cost cap thresholds and implementation timelines

• EPC validity periods and continuous certification requirements

Landlords are encouraged to participate in the consultation process through the online feedback form, particularly regarding the proposed cost caps and implementation deadlines.

Strategic Recommendations

1. Conduct thorough EPC assessments to identify current performance levels

2. Develop a phased improvement plan prioritizing cost-effective measures

3. Investigate grant eligibility and application processes

4. Consider timing improvements to coincide with natural void periods

5. Maintain detailed records of all improvements and associated costs

From Garage to Global Empire: The Zuber Issa Story

Growing up at his father's garage in Manchester, Zuber Issa learned the fundamentals of business long before he became a mogul.

In 2001, he and his brother Mohsin spotted potential in a derelict forecourt in Bury, investing £150,000 in what would become the cornerstone of their empire.

Their genius wasn't just buying properties – it was reimagining them. Where others saw mere gas stations, the Issas envisioned retail destinations. By partnering with brands like Spar and Subway, they transformed simple fuel stops into convenience hubs, creating a formula that would prove unstoppable.

The game-changer came in 2015 when TDR Capital bought a minority stake for £1.3 billion. This partnership catapulted them into international waters, leading to their boldest move yet: a $2.2 billio2n acquisition of 800 Kroger convenience stores in America in 2018.

Success bred ambition, and ambition required debt. By 2023, EG Group's debt hit $10m, but Zuber turned this challenge into opportunity. A $2 billion spin-off of UK businesses to Asda helped right the ship while maintaining momentum.

Now, as EG Group prepares for a reported $13 billion NYSE listing, Zuber has shifted from co-CEO to non-executive director, launching new ventures while watching his original vision expand beyond anything imaginable from that first forecourt in Bury.

That's it for this week folks. Each week we'll cover strategies, updates and insights to help you succeed in real estate. We love this stuff!

If you Have questions or just want to chat, We want to hear it.

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